Amfraser’s report has the following on why Sunsine stands out among the S-chips:
“A better quality S‐chip. Although it is an S‐chip, Sunsine’s customers are not some unidentifiable distributor or retailer in China. They are big reputable names that have accredited Sunsine as a supplier. Sunsine has also been paying a dividend of 1 Sct every
year since its listing and are not hoarding cash. The company is also named as one of the competitors of a Shenzhen‐listed peer, Shandong Yanggu Huatai (300121 CH), which is at the moment being covered by 5 Chinese brokers. Last but not least, Sunsine’s receivable days has remained under 3 months for the last few years; acceptable in our opinion. Receivables that are past due and not yet impaired in 2013 was also insignificant.”
If I may add, Sunsine requires some customers to get banks to underwrite the amounts they owe to Sunsine. This results in the banks assuming the trade receivables. Moreover, Sunsine has the flexibility of getting the money before the due date by paying the bank a fee, or assigning the bank-issued instrument to supplier in settlement of payable.
As at end-Mar 2014, RMB 123m was owed by banks under this arrangement. That tyre companies are prepared to provide Sunsine the extra comfort is testament of good demands of Sunsine’s products.
From 100 odd lots daily volume traded just a few months back to now 3 to 4 k lots traded per day since the confirmation of surge in profits, it can only implied that the best is yet to come. I am salivating at the huge jump in EPS especially. If it improve further in the coming quarters this is the stock to watch regardless of it being s-chip or not. In any case based on who are their clients and the regular dividend, this businesses have to be real. Yes, they have bank borrowing but the money was spend on capex, not unaccounted for or missing into some black holes.
NextInsight
a hub for serious investors
